FORECASTING HR

SUPPLY

DELIVERED BY

DR. PRATYUSH BANERJEE

WHAT IS HR SUPPLY PLANNING?

• Analysis of the supply of workers- the Numbers and

types of people expected to be available to meet the
demand.
• Supply can be from the inside of the organization
(promotions, demotions, transfers, training and
development), In-breeding, etc. or….
• Supply can be from outside the firm (recruitment
from colleges, competitors (poaching), specialized
training, consultancies)
 REASONS FOR CONDUCTING
SUPPLY FORECASTING
• Very few organizations estimate HR supplies than demand.
• Some Managers assume that employees are just ‘warm
bodies’ who can be easily moved or replaced at will.
• But the emerging MNCs concentrate much on supply
analysis.
• A robust HR supply plan can help in addressing several
potential issues such as succession planning, manpower
surplus and shortage analysis, talent shortage analysis etc.
 CAUSES OF SUPPLY SHIFTS
External factors:
• The outside economy influences the internal supply of talent.
• When economy crumbles, turnover often increases; as the economy cools down, turnover
decreases. It is important to gauge such fluctuations
• Technological conditions (example - automation can change the distribution of demand). It
can also mean reduction in supply like layoffs and creation of new job categories.
• Government legislation (changes in laws, regulations, court rulings) stipulate that some
employee categories are accorded special protection from layoff and are given special attention
in hiring, training and promotion.
 CAUSES OF SUPPLY SHIFTS
CONTINUED…
Internal factors:
• voluntary turnover increases when climate is
poor, work group morale is low, and
individuals experience job dissent.
• Organizational structures (firms
outsourcing to service providers) also dictates
the labor demand and supply
 CAUSES OF SUPPLY SHIFTS
CONTINUED…
Workforce factors:
• External HR supplies are affected by availability of
talent from competitors; institutions/universities and
different age groups.
• Small number of people in specific age categories
mean that some HR supplies are less plentiful.
• Longer job tenure, the probability of movement of
labor is great. Turnover can also affect HR supply.
 SUPPLY FORECASTING METHOD 1:
STAFFING CHART:

• It is prepared before or after an annual budget. Time

frame tends to be short-term- a year in most cases.
• Depicts numbers of people in each job category
authorized for the year and numbers presently
occupying those positions.
• Differences between the numbers reveal anticipated
openings at some point, typically at the start of the
budget period.
 REPLACEMENT CHART:

• A graphic depiction of who inside the

organization is ready to assume a higher position.
• In simplistic terms, preparation of a chart is about
the least that can be done to plan for the sudden
loss of key executives.
• Replacement charts can also help plan for
impending retirement of key executives.
A SAMPLE REPLACEMENT
CHART
 Caused when one promotion or transfer in the organization
causes several other movements as a series of people are
promoted to fill the openings

10
SKILLS INVENTORIES:

• Most comprehensive than replacement and succession charts.

• Provide very detailed information abut everyone in the
organization.
• Common data elements include:
• employee name, work location, present position title, previous
position titles, date of birth, date of hire,
• educational level, training completed, fluency in foreign
language, Career objectives, medical history, publications,
professional licenses, hobbies, professional history etc.
AN EXAMPLE OF A SKILLS
INVENTORY
 MARKOV ANALYSIS

• Markov Analysis—transition probability matrix is developed to determine the

probabilities of job incumbents remaining in their jobs for the forecasting period.

The technique is named after Russian mathematician Andrei Andreyevich Markov,

• A transition matrix, or Markov matrix, can be used to model the internal flow of human
resources. These matrices simply show as probabilities the average rate of historical
movement from one job to another.
 TRANSITION MATRIX

• A transition matrix, or Markov matrix, can be used to model the internal

flow of human resources. These matrices simply show as probabilities the
average rate of historical movement from one job to another.
• Such transition matrices form the bases for Markov models representing the
internal flow of people through a large organization over time.
 HOW IS THE TRANSITION
MATRIX CONSTRUCTED?
One needs to collect data regarding:
a.Number of employees in each position at the start of the assessment period
b.Historical employee turnover rates at each position
c.Percentage of employees promoted to a different position by the forecasted time
period
•For a line worker, for example, there is a 20% probability of quitting job in next 12
months, a 0% probability of promotion to manager, a 15% probability of promotion to
supervisor, and a 65% probability of being a line worker this time next year.
 A TYPICAL TRANSITION MATRIX
Year 2020

Year 2019 Senior Analyst Analyst Clerk Exit

Senior Analyst (0.25) (0) (0) (0.50)

(n=8)
Analyst (n=10) (0.10) (0.80) (0.10)

Clerk (n=8) (0.60) (0.40)

Supply (n = 26)
 SOLUTION OF MARKOV MODEL
ANALYSIS
Year 2021

Year 2020 Senior Analyst Analyst Clerk Exit

Senior Analyst (0.50) (0.50)

(n=8) =4 =4
Analyst (n=10) (0.10) (0.80) (0.10)
=1 =8 =1
Clerk (n=8) (0.60) (0.40)
=4.8~5 =3.2~3
No. of Employees in 5 8 5 8
2020 (n=26)
 EXERCISE
Year 2021

Year 2020 JOB A JOB B JOB C Exit

JOB A (0.70) (0) (0) (0.30)

(n=15)
JOB B (0.30) (0.50) (0.20)
(n=35) =10.5~10 =17.5~18 =7
JOB C (0.20) (0.50) (0.30)
(n=120)
Headcount (n = 170)
 MOVEMENT ANALYSIS:

• Movement Analysis is a technique used to analyze personnel

supply, specifically the chain or ripple effect that promotions
or job losses have on the movement of other personnel in an
organization.
• Specifically, we are able to identify the total number of
vacant or open positions in the organizations or department,
as well as the total number of personnel movements that are
caused by replacing and filling these vacant positions.
 MOVEMENT ANALYSIS
EXERCISE
Staff increase plan for 2021:
5% increase for levels 6-9  Positions at start of year 2021
o 1 – level 4
1 additional employee at level 4 o 6 – level 5
6 additional employees at level 5 o 20 – level 6
o 32 – level 7
Historical annual loss rates
Retirements o 40 – level 8
o 2 positions level 5 o 50 – level 9
o 15% levels 6-9
Turnover
o 10% at levels 5 and 6
o 15% at level 7
o 20% at level 8
o 25% at level 9
 MOVEMENT ANALYSIS EXERCISE
LevelSOLUTION
Positions at Start of Staff Increase Staff Losses Positions to be Filled
2020 by 2021
4 1 1 0 1
3 (2 retirements +10%
5 6 6 9
of turnover)

6 20 1 (5% incr.) 5 (15%of20+10%of20) 6

10 (15%of32+15%0f
7 32 2 (5% incr.) 12
32)

2 (5% incr.) 14 (20% of 40+ 15% of

8 40 16
40)

20 (25%of 50+15%of
9 50 3 (5% incr.) 23
50)
149 15 52 67

Start at the top with the most senior positions since most movement in
organizations is up due to promotions and replacements.
 VACANCY MODELS

• Also known as renewal or sequencing model

• Analyzes flow of personnel throughout the organization by
examining inputs and outputs at each managerial or
compensation level
 VACANCY MODEL EXERCISE

 Analyzes people flow throughout the organization at each

functional or compensation level

Use the following information to calculate next year’s supply forecast.

HR loss during the year Replacement Policy (% external / % internal)

% external % internal
Level 1 (president) = 100% Level 1 0 100
Level 2 (vice presidents) = 20% Level 2 10 90
Level 3 (directors) = 22% Level 3 20 80
Level 4 (managers) = 25% Level 4 30 70
Level 5 (senior analysts) = 30% Level 5 50 50
Level 6 (analysts) = 50% Level 6 100 0
 ADDITIONAL INFORMATION

 Positions at start of year

o 1 – level 1
o 4 – level 2
Level 1- President is going to
o 18 – level 3 retire by next year
o 36 – level 4
o 80 – level 5
o 136 – level 6
VACANCY MODEL EXERCISE SOLUTION
HR SUPPLY AND RETENTION PROGRAMS
• Worksharing
• Improve organizational culture
• Expatriate assignments
• Job redesign
• Flexi-time and telecommuting
• Work from home
• Extension of retirement age
THANK YOU